<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11 (c) or Rule 14a-12
MEDICORE, INC.
...........................................................................
(Name of Registrant as Specified In Its Charter)
...........................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.................................................................
2) Aggregate number of securities to which transaction applies:
.................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
.................................................................
4) Proposed maximum aggregate value of transaction:
.................................................................
5) Total fee paid:
.................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registra-
tion statement number, or the Form or Schedule and the date of its
filing.
1) Amount Previously Paid:
.......................................
2) Form, Schedule or Registration Statement No.:
.......................................
3) Filing Party:
.......................................
4) Date Filed:
.......................................
<PAGE>
MEDICORE, INC.
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 10, 1998
----------
To Shareholders:
The Annual Meeting of Shareholders of MEDICORE, INC. (the "Company")
will be held at the Don Shula Hotel, 15255 Bull Run Road, Miami Lakes,
Florida on Wednesday, June 10, 1998 at 10:00 a.m., for the following
purposes:
1. To elect two members to the Class 3 members of the Board of
Directors to serve for a three year term until the Annual
Meeting of Shareholders in 2001; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 17,
1998, as the record date for the determination of the shareholders entitled
to notice of and to vote at the meeting and any adjournment thereof.
Your copy of the Annual Report of the Company for 1997 is enclosed.
- ---------------------------------------------------------------------------
It is important that your shares be represented at the Annual Meeting in
order that the presence of a quorum be assured and to avoid added proxy
solicitation costs. THEREFORE, YOUR PERSONAL ATTENDANCE OR PROXY IS
IMPORTANT. Whether or not you plan to attend, please sign and date the
accompanying proxy and return it promptly in the enclosed self-addressed
envelope. All shareholders are cordially invited to attend the meeting.
If you attend the meeting and decide to vote in person, you may revoke your
proxy.
- ---------------------------------------------------------------------------
By Order of the Board of Directors
LAWRENCE E. JAFFE
Secretary and Counsel
Hasbrouck Heights, New Jersey
May 1, 1998
<PAGE> 1
MEDICORE, INC.
2337 West 76th Street
Hialeah, Florida 33016
----------
Proxy Statement for Annual Meeting of Shareholders
June 10, 1998
----------
Solicitation and Revocation of Proxies
This Proxy Statement and accompanying form of proxy and the Company's
Annual Report to Shareholders for the year ended December 31, 1997,
anticipated to be mailed on or about May 4, 1998, is solicited by and on
behalf of the board of directors of Medicore, Inc., a Florida corporation
(the "Company") for the Annual Meeting of Shareholders of the Company to
be held on Wednesday, June 10, 1998, at the Don Shula Hotel, 15255 Bull
Run Road, Miami Lakes, Florida at 10:00 a.m., including any adjournment
thereof, for the purposes set forth in the Notice of Annual Meeting and
Proxy Statement.
If the enclosed form of proxy is executed and returned, it will be
voted as directed, but may be revoked at any time insofar as it has not
been exercised, either by a written notice of the revocation received by
the persons named therein, or by voting the shares covered thereby in
person or by another proxy dated subsequent to the date thereof. In the
absence of specific instructions by the shareholders, proxies will be
voted for the election of the two members of Class 3 directors to serve
on the board of directors for a three year term until the 2001 Annual
Meeting of Shareholders. Abstentions and broker non-votes will be counted
for purposes of a quorum, with abstentions having the legal effect of a
vote "against" the election of the Class 3 directors. In instances where
brokers are prohibited from exercising discretionary authority for
beneficial owners who have not returned a proxy (broker no-votes, which
is not the case with respect to the election of directors), such shares
will not be included in the vote totals and, therefore will have no
effect on the vote. The form of proxy vests in the persons named therein
as proxies discretionary authority to vote on any matter that may properly
come before the meeting not presently known to the board of directors.
The cost of preparing and mailing the Notice of Annual Meeting and
proxy material and soliciting proxies will be paid by the Company. In
addition to the use of the mails, officers, directors or employees of the
Company, who will receive no additional compensation therefore, may solicit
proxies by telephone or personal interview. The Company will request
brokers, nominees, fiduciaries and custodians to forward proxy material
to their beneficial owners, and will reimburse such persons for reasonable
expenses incurred by them in forwarding the proxy materials.
Record Date
The board of directors has fixed the close of business on April 17,
1998, as the record date for the determination of shareholders entitled
to receive notice of and to vote at the Annual Meeting and any adjournment
thereof. Only shareholders of record on that date are entitled to vote at
the meeting.
<PAGE> 2
Voting Securities
As of April 17, 1998 there were outstanding and entitled to be voted
at the Annual Meeting, 5,847,740 shares of common stock, $.01 par value
("Common Stock"). Each share of Common Stock is entitled to one vote. A
majority of the outstanding shares is needed for a quorum and a plurality
of the votes cast, in person or by proxy, is necessary to effectuate
election of the two directors for the Class 3 members of the board of
directors.
ELECTION OF DIRECTORS
At the Annual Meeting, the shareholders will elect two Class 3 direc-
tors in accordance with the Company's Restated Articles of Incorporation
("Articles of Incorporation"), which provides for two members to serve for
three years, until the 2001 Annual Meeting of Shareholders, and until
each of their successors is elected and qualified. The Articles of
Incorporation and By-Laws of the Company provide that Class 3 directors
shall not be more than two persons, and that the majority of directors
have the right to appoint candidates to fill any vacancies on the board,
whether through death, retirement or other termination of a director, or
through an increase in the board. At such time that qualified candidates
are available to serve, the majority of the board, although less than a
quorum, or by a sole remaining director, may appoint such person to fill
any vacancy. There currently exists a singular vacancy in Class 1
directors. When appointed, the new appointee, such as the Class 1
director, shall then serve for the remainder of the term provided in the
Articles of Incorporation.
The affirmative vote of a plurality of the shares of Common Stock
represented at the meeting is required to elect the Class 3 directors.
Cumulative voting is not permitted in the election of directors. Conse-
quently, each shareholder is entitled to one vote for each share of
Common Stock held in his name. The persons named as proxies in the form
of proxy solicited hereby intend to vote all valid proxies received in
favor of the election of the persons named below as nominees for Class 3
directors except where authority is withheld by the shareholder. The two
nominees are Thomas K. Langbein and Seymour Friend, both of whom have been
on the board of directors for many years. Mr. Langbein has served as the
Chairman of the Board since 1980, and Mr. Friend has been a director of
the Company since 1975.
The nominees have consented to be named herein and to serve on the
board of directors if elected. If either nominee is unable to serve as
a director (which presently is not anticipated), the proxies will be voted
for such substituted nominees as may be designated by the present board of
directors. To apprise shareholders of the qualifications of all directors,
information is provided concerning the two nominees and the three incumbent
directors whose terms expire in 1999 and 2000.
There is no nominating committee. Nominations for directors are con-
sidered by the entire board of directors.
For additional information concerning the two nominees for Class 3
directors and the incumbent directors, including compensation and share
ownership, see "Executive Compensation," "Beneficial Ownership of the
Company's Securities" and "Certain Relationships and Related Transactions."
<PAGE> 3
Nominees for Class 3 Directors
Current Position
Name Age and Areas of Responsibility Position Held Since
- ---- --- --------------------------- -------------------
Thomas K. Langbein 52 Chairman of the Board of 1980
Directors, Chief Executive
Officer and President
Seymour Friend 77 Vice President 1981
Director 1975
Thomas K. Langbein was appointed as Chairman of the Board of Directors,
Chief Executive Officer and President of the Company in 1980. Mr. Langbein
is the Chairman of the Board and the Chief Executive Officer of most of the
Company's subsidiaries. He has been a director of Techdyne, Inc., a 63%
owned public subsidiary ("Techdyne") since it was acquired by the Company
in 1982. He was appointed President and Chief Executive Officer of
Techdyne in April, 1990, and Barry Pardon succeeded to the Presidency of
Techdyne in November, 1991. He is also a director of Lytton Incorporated,
an Ohio electronics and electro-mechanical manufacturer acquired by
Techdyne in July, 1997 and of Techdyne's foreign subsidiary, Techdyne
(Scotland). Mr. Langbein is Chairman of the Board and Chief Executive
Officer of Dialysis Corporation of America, a 66% owned subsidiary
("DCA"). Mr. Langbein is President, sole shareholder and director of
Todd & Company, Inc. ("Todd"), a broker-dealer registered with the
Securities and Exchange Commission and a member of the National Associa-
tion of Securities Dealers, Inc. Mr. Langbein devotes most of his time
to the affairs of the Company, Techdyne and DCA.
Seymour Friend is a real estate investor and devotes a portion of his
time to the affairs of the Company.
Incumbent Directors
Current Position and
Name Age Areas of Responsibility Position Held Since
- ---- --- ----------------------- -------------------
Peter D. Fischbein(1)(2) 58 Director 1984
Anthony C. D'Amore(3) 67 Director 1979
Robert P. Magrann(1)(3) 54 Director 1997
- ----------
(1) Member of the Audit Committee.
(2) Class 1 director; term ends in 1999.
(3) Class 2 director; term ends in 2000.
<PAGE> 4
Peter D. Fischbein is an attorney who has from time to time repre-
sented the Company, Techdyne, Viragen and Todd. Mr. Fischbein is a
director of Viragen (since 1981) and Techdyne (since 1985). Mr. Fischbein
is a general partner of several limited partnerships engaged in real
estate development. See "Certain Relationships and Related Transactions."
Anthony C. D'Amore is a director of Techdyne and is registered as a
part-time account executive with Todd, but has not been active in the
brokerage business for many years. Mr. D'Amore was the owner of an
insurance agency, the A.C. D'Amore Agency, Inc., which he sold in 1992,
and from whom the Company and Techdyne and their subsidiaries purchase
much of their insurance at rates competitive with unaffiliated third
parties. Mr. D'Amore continues to receive commissions with respect to
such insurance. See "Certain Relationships and Related Transactions."
Robert P. Magrann has been a senior executive and general manager at
major national and international food distributors. From 1991 to 1994,
Mr. Magrann was Executive Vice President of E. J. Brach Corporation and
from 1994 to 1996 he was Senior Vice President at Borden, Inc., both of
which positions entailed management supervision and responsibility for
marketing, sales and public relations. In September, 1996, Mr. Magrann
became affiliated with Tetley USA, Inc., a beverage producer and
distributor, with whom he holds the position of Senior Vice President,
Sales for its North America Food Group.
There are no family relationships among any of the officers or
directors of the Company.
Since the last Annual Meeting in June, 1997, there were seven meetings
of the board of directors, including actions by unanimous written consent.
All directors participated at all the meetings, either present in person
or via telephone.
The only committee the Company has is an audit committee consisting
of Peter D. Fischbein and Robert P. Magrann. The audit committee, which
meets informally, usually on a monthly basis, is responsible for
recommending to the board of directors the firm of independent
accountants to serve the Company, reviewing fees, services and results
of the audit by such independent accountants, reviewing the accounting
books and records of the Company and reviewing the scope, results and
adequacy of the internal audit control procedures of the Company. No
member of the audit committee receives a fee for his services. The
By-Laws provide for and the Company has made payment of reasonable
expenses for directors' attendance at meetings. In lieu of any cash
compensation or per meeting fees to directors for acting as such, the
Company has provided directors, among others, with options to purchase
Common Stock of the Company at fair market value as of the date of grant.
See "Executive Compensation - Options, Warrants or Rights" and "Beneficial
Ownership of the Company's Securities."
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
Management
The following table sets forth as of April 17, 1998, the names and
beneficial ownership of the equity securities of the Company and its
subsidiaries for directors, individually itemized, and for directors and
officers as a group, without naming them, and for each of the named
executive officers disclosed in the Summary Compensation Table. See
"Executive Compensation."
<PAGE> 5
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership(1)
-------------------------------------------------------------------------------
Medicore Techdyne DCA
Common Common Common
Name Stock %(2)(3) Stock(4) %(3)(5) Stock(6) %(3)(7)
- ---- ----- ------- -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Thomas K. Langbein(8) 1,043,014(9) 17.1% 4,717,727(3)(10) 71.2% 2,460,622(11) 67.4%
Seymour Friend(8) 432,705(12) 7.3% 31,333(13) * 3,000(14) *
Peter D. Fischbein(15) 176,229(16) 3.0% 55,000(17) 1.1% ---(18) ---
Anthony C. D'Amore(19) 273,890(20) 4.6% 44,000(21) * 3,000(22) *
Robert P. Magrann(19) 44,000(23) * --- --- 2,000(24) *
Barry Pardon(25) 135,750(26) 2.3% 184,333(27) 3.5% ---(28) ---
All directors and 2,040,888(29) 32.0% 4,873,060(4)(5)(10) 72.2% 2,476,122(30) 67.7%(6)(7)(11)
executive officers
as a group (6 persons)
</TABLE>
- ----------
* less than 1 %
(1) Based upon information furnished to the Company by either the
directors and officers or obtained from the stock transfer books
of the Company. The Company is informed that these persons hold
sole voting and dispositive power with respect to the shares of
Common Stock except as noted herein.
(2) Based on 5,847,740 shares outstanding. Does not include 841,000
shares of Common Stock underlying options granted in April, 1995
under the Company's 1989 Stock Option Plan, which are registered and
exercisable at $2.38 per share. See Note (3) and "Executive Compen-
sation - Options, Warrants or Rights."
(3) For purposes of computing the percentage of outstanding shares held
by each person or group of persons named above, any security which
such person or group of persons has the right to acquire within 60
days of April 17, 1998 is deemed to be outstanding for purposes of
computing the percentage ownership of such person or persons, but
is not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
(4) The Company owns 4,537,727 shares (70.4%) of the common stock of
Techdyne. Includes 1,309,930 shares which the Company may acquire
upon conversion of its demand convertible promissory note from
Techdyne in the amount of approximately $2,292,377 at December 31,
1997, including accrued interest, convertible at $1.75 per share.
See Note (3). Exclusive of the convertible note, the Company owns
3,227,797 shares of Techdyne (approximately 63%). Officers and
directors of the Company, including those directors of the Company
and Techdyne who may be shareholders of each company, except Thomas K.
Langbein (see Note (10)),
<PAGE> 6
disclaim any indirect beneficial ownership of Techdyne common shares
through the Company's 70.4% ownership of Techdyne.
(5) Based on 5,135,167 Techdyne shares outstanding plus 1,309,930 shares
obtainable under the Company's convertible note. See Notes (3) and
(4). Does not include (i) options granted in 1994, 1995 and 1997
for an aggregate of 699,100 shares of Techdyne common stock; (ii)
common stock issuable under 1,000,000 Warrants exercisable at $5.00
per share through September 12, 1998; or (iii) any additional shares
that may have to be issued pursuant to Techdyne's guarantee to the
seller of Lytton. See "Executive Compensation - Options, Warrants
or Rights" and "Certain Relationships and Related Transactions."
(6) The Company owns 2,410,622 shares (66%) of the common stock of DCA.
Officers and directors of the Company, including those officers and
directors of the Company and DCA who may be shareholders of each
Company, except Thomas K. Langbein (see Note (11)), disclaim any
indirect beneficial ownership of DCA common stock through the
Company's 66% ownership of DCA.
(7) Based on 3,651,494 DCA shares outstanding exclusive of 100,000
treasury shares.
(8) Class 3 director; term to 1998 Annual Meeting of Shareholders. See
"Election of Directors."
(9) Includes 250,000 shares of Common Stock underlying options granted
in April, 1995, exercisable at $2.38 per share through April 17,
2000. Does not include (i) 15,700 shares each held in the names of
Mr. Langbein's two children who are of majority age; and (ii) an
option to acquire up to 400,000 shares of Common Stock in lieu of a
lump sum payment, which option is not presently exercisable except
in the event of a change in control of the Company. See Note (2)
and "Employment Contracts and Termination of Employment and Change-
In-Control Arrangements" and "Options, Warrants or Rights" under the
caption "Executive Compensation."
(10) Includes (i) the Company's 4,537,727 share ownership of Techdyne,
including 1,309,930 shares of Techdyne which the Company may obtain
upon conversion of its demand promissory note (see Note (4) above),
by virtue of his position with the Company and Techdyne and stock
ownership of the Company, which may deem Mr. Langbein to have bene-
ficial ownership of such shares through shared voting and investment
power with respect to the Company's ownership of Techdyne; Mr.
Langbein disclaims such entire beneficial ownership, but for his
proportionate interest, approximately 776,000 shares of Techdyne
(12.0%); and (ii) Techdyne options for 180,000 shares. See "Executive
Compensation - Options, Warrants or Rights."
(11) Includes (i) the Company's 2,410,622 share ownership, by virtue of
his position with the Company and DCA and his stock ownership of the
Company, which may deem Mr. Langbein to have beneficial ownership of
such shares through shared voting and investment power with respect
to the Company's ownership of DCA; Mr. Langbein disclaims such entire
beneficial ownership, but for his proportionate interest, approximately
412,000 shares of DCA (11.3%); and (ii) 50,000 shares of DCA common
stock directly owned and issued upon exercise of an option on December
31, 1997. See "Executive Compensation - Options, Warrants or Rights."
(12) Includes 75,000 shares of Common Stock underlying options granted in
April, 1995 exercisable at $2.38 per share through April 17, 2000.
See Note (2) and "Executive Compensation - Option, Warrants or Rights."
<PAGE> 7
(13) Includes Techdyne options for 15,000 shares. See "Executive Compen-
sation." Excludes approximately 331,000 (5.1%) shares that may be
deemed indirectly beneficially owned through the Company's ownership
of Techdyne, which indirect beneficial ownership is disclaimed. See
Note (4).
(14) Includes 2,000 shares underlying DCA warrants exercisable at $4.50
per share through April 16, 1999. Excludes approximately176,000
(4.8%) shares that may be deemed indirectly beneficially owned
through the Company's ownership of DCA, which indirect beneficial
ownership is disclaimed. See Note (6).
(15) Class 1 director; term to 1999. See "Election of Directors."
(16) Includes (i) 100,000 shares held in trust for his infant son; Mr.
Fischbein's wife is trustee; Mr. Fischbein disclaims beneficial
interest in these 100,000 shares; and (ii) 75,000 shares of Common
Stock underlying options granted in April, 1995 exercisable at $2.38
per share through April 17, 2000. See Note (2) and "Executive
Compensation - Options, Warrants, or Rights." Does not include
196,382 shares of Common Stock owned by his wife in which shares,
based on her financial independence, Mr. Fischbein disclaims bene-
ficial interest.
(17) Includes Techdyne options for 55,000 shares. See "Executive Compen-
sation." Excludes approximately 136,000 (2.1%) shares that may be
deemed indirectly beneficially owned through the Company's ownership
of Techdyne, which indirect beneficial ownership is disclaimed. See
Note (4).
(18) Excludes approximately 72,000 (2.0%) shares that may be deemed
indirectly beneficially owned through the Company's ownership of DCA,
which indirect beneficial ownership is disclaimed. See Note (6).
(19) Class 2 director; term to 2000 Annual Meeting of Shareholders. See
"Election of Directors."
(20) Includes 75,000 shares of Common Stock underlying options granted in
April, 1995 exercisable at $2.38 per share through April 17, 2000.
See Note (2) and "Executive Compensation - Options, Warrants, or
Rights."
(21) Includes (i) Techdyne options for 25,000 shares (see "Executive
Compensation"); (ii) Techdyne warrants for 4,000 shares of Common
Stock exercisable at $5.00 per share through September 12, 1998 held
in his retirement plan; and (iii) 15,000 shares of Common Stock held
in his retirement plan. Excludes approximately 209,000 (3.2%) shares
that may be deemed indirectly beneficially owned through the Company's
ownership of Techdyne, which indirect beneficial ownership is dis-
claimed. See Note (4).
(22) Includes 2,000 shares underlying DCA warrants exercisable at $4.50
per share through April 16, 1999. Excludes approximately 111,000
(3.0%) shares that may be deemed indirectly beneficially owned
through the Company's ownership of DCA, which indirect beneficial
ownership is disclaimed. See Note (6).
(23) Includes 35,000 shares of Common Stock underlying options granted in
June, 1997 pursuant to the Company's 1989 Stock Option Plan exer-
cisable at $3.75 per share, the fair market value on
<PAGE> 8
the date of grant, reduced to $2.38, the fair market value on the
repricing date of September 10, 1997 to be equivalent with the other
directors' options. See Note (2) and "Executive Compensation -
Options, Warrants or Rights."
(24) Includes 2,000 shares underlying DCA warrants exercisable at $4.50
per share through April 16, 1999. Excludes approximately 14,000
shares (.4%) which may be deemed indirectly beneficially owned
through the Company's ownership of DCA, which indirect beneficial
ownership is disclaimed.
(25) President and director of Techdyne; not an executive officer or
director of the Company, but deemed a significant person based on
Techdyne's financial importance relating to the Company.
(26) Includes (i) 75,000 shares of Common Stock underlying options granted
in April, 1995 exercisable at $2.38 per share through April 17, 2000;
and (ii) 7,200 shares of Common Stock owned by his wife. See Note
(2) and "Executive Compensation - Options, Warrants, or Rights."
(27) Includes (i) Techdyne options for 180,000 shares (see "Executive
Compensation"); (ii) Techdyne warrants for 1,000 shares of common
stock exercisable at $5.00 per share through September 12, 1998; and
(iii) 2,333 shares held in his wife's name. Excludes approximately
104,000 (1.6%) shares that may be deemed indirectly beneficially
owned through the Company's ownership of Techdyne, which indirect
beneficial ownership is disclaimed. See Note (4).
(28) Excludes approximately 55,000 (1.5%) shares that may be deemed
indirectly beneficially owned through the Company's ownership of
DCA, which indirect beneficial ownership is disclaimed. See Note (6).
(29) Does not include Barry Pardon's interest. See Note (25) above. In-
cludes 540,000 shares of Common Stock underlying the options granted
in April, 1995. See Note (2) and "Executive Compensation - Options,
Warrants, or Rights."
(30) Does not include Barry Pardon's interest. See Note (25) above.
Other Principal Security Holders
Other than for Messrs. Langbein and Friend, both of whom are officers
and directors of the Company, no other shareholder is known by the Company,
nor has it received any Schedule 13D reflecting the same, to own bene-
ficially more than 5% of its voting securities. See "Beneficial Ownership
of the Company's Securities - Management."
<PAGE> 9
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth compensation paid by
the Company and its subsidiaries for the last three fiscal years ended
December 31, 1997 for services in all capacities for its Chief Executive
Officer and each of its principal executive officers whose total annual
salary and bonus exceeded $100,000.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------ --------------------------------
Awards
------
(a) (b) (c) (e) (g) (i)
Other
Annual Securities All Other
Name and Compen- Underlying Compensation
Principal Position Year Salary($) sation($)(2) Options/SARs(#) ($)
- ------------------ ---- --------- ------------ --------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CEO
Thomas K. Langbein 1997 257,000(1) 34,300 --- 100,000 --- 74,500(1)(4)
1996 262,000(1) 24,800 250,000 --- --- 94,200(1)(5)
1995 230,100 26,100 250,000 40,000 50,000(4) ---
Barry Pardon(6) 1997 144,100 8,000 --- 100,000 --- ---
1996 60,600(7) 8,800 75,000 --- --- 22,500(7)(8)
1995 13,000 8,200 75,000 40,000 --- ---
</TABLE>
- ----------
(1) Includes a $25,000 bonus in 1996 for Mr. Langbein. Does not include
(i) the Company's June, 1996 forgiveness of indebtedness of a promis-
sory note issued in 1994 for an option exercise for 130,000 shares of
the Company's Common Stock; and (ii) DCA's December, 1997 forgiveness
of a promissory note issued in December, 1997 for an option exercise
for 50,000 shares of DCA common stock. See "Options, Warrants or
Rights" below.
(2) Includes automobile allowance and related expenses, life and disability
insurance premiums, and $1,000 compensation received in 1995 by Messrs.
Langbein and Pardon as directors to Techdyne (Scotland).
(3) In April, 1995, the Company granted non-qualified stock options under
its 1989 Stock Option Plan to officers, directors, employees and con-
sultants for 809,000 shares of Common Stock, now 841,000, originally
exercisable at $3.00 per share adjusted to $2.38 per share on December
30, 1996, the fair market value on that date. In June, 1997 a new
director was elected and was granted options for 35,000 shares of the
Company's Common Stock exercisable at $3.75 per share, adjusted to
$2.38 per share on September 10, 1997, the fair market value on that
date, equivalent to the exercise price of the other directors. See
"Options, Warrants or Rights" below and Notes (2) and (24) to "Bene-
ficial Ownership of the Company's Securities."
<PAGE> 10
(4) The options for 50,000 shares of DCA common stock were exercised
effective December 31, 1997 at $1.50 per share. Consideration for
these shares was paid in cash for the par value and a promissory note
issued for the balance. On December 31, 1997, DCA forgave the indebt-
edness under the notes, which notes were cancelled. See Note (1) above.
(5) The option for the 130,000 shares of the Company's Common Stock was
exercised in 1992 at $.69 per share. Consideration for these shares
was paid in cash for the par value and a three year promissory note
issued for the balance with interest at 5.36% per annum. On June 5,
1996, the Company forgave the indebtedness under the notes, which
notes were cancelled. See Note (1) above.
(6) President and director of Techdyne, Chairman of the Board and Chief
Executive Officer of Lytton and director of Techdyne (Scotland).
(7) Does not include the Company's June, 1996 forgiveness of indebtedness
of a promissory note issued in 1994 for an option exercise for 30,000
shares of the Company's Common Stock. See "Options, Warrants or
Rights" below.
(8) The option for the 30,000 shares of the Company's Common Stock was
exercised in 1992 at $.69 per share. See above Note (5) for the
consideration and Note (7).
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
Mr. Langbein has an employment agreement with the Company through May
31, 1999 at an annual salary of $220,000 with yearly increases in incre-
ments of no less than $10,000 which increases Mr. Langbein had waived in
prior years. The first $10,000 increment became effective June 1, 1995.
The Company also provides Mr. Langbein with an automobile allowance of
$850 per month. The employment agreement further provides upon the death
of Mr. Langbein three years full salary to his former wife or other
designee of Mr. Langbein, and for reimbursement of reasonable business
expenses and full salary for the remainder of the term of the employment
agreement in the event of disability. The Company maintains an income
disability insurance policy for Mr. Langbein. The employment agreement
also provides for life insurance, of which a $500,000 policy owned by the
Company was assigned to Mr. Langbein the first quarter of 1997. The
Company also maintains a $750,000 whole life insurance policy and a
$350,000 term policy insuring the life of Mr. Langbein with Mr. Langbein
as the owner of both policies. His former wife is beneficiary of $550,000
of these policies, with his two children beneficiaries to the balance.
Most life insurance maintained by the Company on Mr. Langbein's life is
obtained through George Langbein, his brother, who is affiliated with
Techdyne as an independent sales representative. See "Certain Relation-
ships and Related Transactions." The employment agreement also contains
a two (2) year non-competition provision within a 20 mile radius of the
Company's primary operations in Florida. The Company has the right, upon
Mr. Langbein's termination, to request further non-competition by Mr.
Langbein in the United States for consideration of $4,000 per month,
increasing 5% in any twelve-month period.
Based upon any wrongful termination of his employment agreement, which
includes changes in control of the Company through an acquiring person (any
person who has acquired or announces a tender offer or exchange for 25% of
the shares of the Company), a sale of substantially all of the assets, a
merger, an acquisition of the Company or its consolidation with another,
or certain types of board changes, the Company shall pay Mr. Langbein a
lump sum payment, based upon his then compensation,
<PAGE> 11
including benefits and perquisites, for the next three years from such
termination. At Mr. Langbein's option, he may elect, in lieu of any such
lump sum payment, to take Common Stock of the Company equivalent to such
lump sum payment based upon the lowest closing price of the stock as
reported by the principal stock exchange upon which the shares are then
trading, or if the trading is then in the over-the-counter market,
presently trading on the Nasdaq National Market, then as reported by
Nasdaq (or other inter-dealer quotation medium) within 30 days of such
wrongful termination or change in control. The Company has reserved up
to 400,000 shares of its Common Stock for such option to Mr. Langbein.
The Company has granted Mr. Langbein one time demand and five year
"piggy-back" registration rights with respect to such shares, which would
be at the sole cost and expense of the Company except with respect to Mr.
Langbein's legal fees and commissions or discounts upon sale of such stock.
Barry Pardon, director and President of Techdyne, has a five-year
employment agreement with Techdyne through December 31, 2000, which
provides him with a base annual salary of $120,000, plus an over-ride
commission of .5% of net sales of Techdyne in excess of $20,000,000 the
first year of the agreement, increasing $1,000,000 each successive year
of the term. Should any companies be acquired by Techdyne, such as Lytton,
the net sales of that acquired company for the immediately preceding fiscal
year are added to the base $20,000,000 (plus $1,000,000 yearly increases)
before the .5% over-ride applies. In January, 1993, as part of Techdyne's
administrative cost reduction program, Mr. Pardon voluntarily reduced his
base salary to $84,000, which was increased to $96,000 in April, 1994, to
$108,000 in March, 1995, and now remains at his contracted-for base salary.
Under the employment agreement, Mr. Pardon is entitled to severance pay of
nine months salary if he is terminated without cause during the term, or
his estate receives it if he dies. Mr. Pardon is furnished with an auto-
mobile, travel and entertainment expenses incurred relating to Techdyne's
business, which sums did not exceed 10% of his reported cash compensation
for 1997. His employment agreement provides for non-competition for one
year following termination and for restrictions upon Mr. Pardon calling
upon any customers or suppliers of Techdyne, diverting any customers,
services, items or products of Techdyne or disclosing any trade secrets of
Techdyne.
Certain executive and accounting personnel and administrative facili-
ties of the Company and its subsidiaries, including Techdyne and DCA, were
common for fiscal 1997. The costs of executive and accounting salaries
and other shared corporate overhead for these companies were charged on
the basis of direct usage when identifiable with the remainder allocated
on the basis of time spent with Techdyne's allocation now accomplished
pursuant to a two-year Service Agreement which commenced October 1, 1996.
Mr. Langbein, as an officer and director of the Company, Techdyne and DCA,
and Mr. Ouzts, as an officer of the Company, Techdyne and DCA, both divide
their time and efforts among the companies. See "Executive Compensation"
and "Certain Relationships and Related Transactions."
Compensation of Directors
Standard Arrangements
There are no standard arrangements for compensating directors for
services as directors or for acting on any committee. The Company does
reimburse directors for expenses of attending meetings.
Non-Standard Arrangements
For the year ended December 31, 1997, the Company obtained its
property, casualty and general liability insurance, as did its subsidi-
aries, through arrangements made by one of its directors, Anthony C.
<PAGE> 12
D'Amore, who received $4,000 in commissions in 1997 with respect to this
insurance. See "Certain Relationships and Related Transactions."
The Company has provided options to its directors, among other execu-
tives and consultants. Its public subsidiaries, Techdyne and DCA, have
also issued options to their respective officers, directors and advisors.
Three of the directors of the Company are directors of Techdyne and have
received Techdyne options, and Mr. Langbein, also Chairman of the Board
of Directors of DCA, received options from that subsidiary. See "Bene-
ficial Ownership of the Company's Securities" and below "Options,
Warrants or Rights" and "Certain Relationships and Related Transactions."
Techdyne granted options under its 1997 Stock Option Plan to certain
directors of the Company in June, 1997 exercisable at $3.25 per share
through June 22, 2002. Messrs. Langbein, Friend, Fischbein, D'Amore, and
Ouzts, officers and/or directors of the Company, received options for
Techdyne common stock. In April, 1995 Options were granted under the
Company's 1989 Stock Option Plan (the "Option Plan") exercisable into
Common Stock at $3.00 per share, reduced to $2.38 per share on December
30, 1996, the then fair market value. The 1995 options were granted to
officers, directors, consultants and certain employees of the Company and
its subsidiaries, which includes options for 250,000 shares of Common Stock
to Mr. Langbein, and options for 75,000 shares of Common Stock each to
Messrs. Friend, Fischbein and D'Amore. Upon Robert P. Magrann being
elected a director of the Company in June, 1997, he was granted options
for 35,000 shares of Common Stock exercisable at $3.75, which were repriced
to $2.38 on September 10, 1997, the fair market value on that date, which
exercise price is equivalent to that of the other directors of the Company.
Any repricing is deemed a new grant of options. See "Options, Warrants or
Rights."
Options, Warrants or Rights
In May, 1989, the board of directors adopted the 1989 Stock Option Plan
(the "Option Plan"), approved by shareholders in July, 1994, pursuant to
which 1,000,000 shares of Common Stock are reserved for issuance under
options at fair market value on the date of grant. The Option Plan is for
a period of 20 years, terminating May 18, 2009. Under the Option Plan,
options may be granted to employees, officers, directors, attorneys,
consultants and similar parties who provide their skills and expertise to
the Company. Options granted under the Option Plan are non-transferable
and are exercisable for five years (no vesting schedule) from date of grant,
but may expire at the earlier of two years from retirement, permanent
disability or death. The options were exercisable 50% on or after the
first anniversary date of grant and in full on or after the second anni-
versary date of grant, which have both passed, rendering each option fully
exercisable.
Options under the Option Plan may be exercised either with cash or
Company stock or both. If exercised with stock the shares are valued at
the current market price and the optionee obtains an additional non-quali-
fied stock option for the stock used for the exercise. This new option is
exercisable at the then current market price for the remainder of the
original option period under the same terms of the original option. Stock
for stock exercises of options allow for the withholding of shares to cover
tax liability upon exercise.
On April 18, 1995, the board granted options for 809,000 shares of
Common Stock under the Option Plan exercisable at $3.00 per share, the
closing price for the stock on the date of grant. Based on three employee
terminations and a grant to a new director in 1997, there are presently
outstanding Options for 841,000 shares of Common Stock. As permitted
pursuant to the terms of the Option Plan, on December 30, 1996, the stock
option committee and the board of directors authorized the repricing of the
<PAGE> 13
exercise price of the options to $2.38 per share based upon the closing
price of the Company's Common Stock on the Nasdaq National Market on that
date. An option for 35,000 shares of Common Stock was granted to a newly
elected director in June, 1997 exercisable at $3.75 and repriced on
September 10, 1997 to $2.38, the fair market value on that date and an
equivalent exercise price with the other directors of the Company. See
"Beneficial Ownership of the Company's Securities," "Executive Compensa-
tion - Compensation of Directors - Non-Standard Arrangements" below. The
Company has registered these shares for resale by the optionees.
In May, 1994, the board of directors and shareholders of Techdyne
adopted the 1994 Techdyne, Inc. Stock Option Plan (the "Techdyne 1994
Plan"). In November, 1995, the board of directors and shareholders of
DCA adopted the 1995 Dialysis Corporation of America Stock Option Plan
(the "DCA 1995 Plan"). Each of the Techdyne 1994 and the DCA 1995 Plans
are substantially similar and the following description applies to each,
unless otherwise indicated.
250,000 shares of common stock are reserved for issuance at 100% of the
fair market value on the date of grant. The Techdyne 1994 Plan expires May
24, 1999 and the DCA 1995 Plan expires November 9, 2000. Options may be
and have been granted to officers, directors, consultants, key employees,
advisors and similar parties, may be exercisable for up to five years, may
require vesting, are non-transferable except by the laws of descent and
distribution or a change in control of the Company, and are exercisable
only by the participant during his lifetime.
A change in control includes (i) the sale of substantially all of the
assets of the company or its merger or consolidation with another, or (ii)
a majority of the board changes other than by election by shareholders
pursuant to board solicitation or by vacancies filled by the board caused
by death or resignation, or (iii) a person or group acquires 25% or makes
a tender for 25% of the company's outstanding shares.
If a participant ceases affiliation with the company by reason of
death, permanent disability or retirement at or after age 65, the option
remains exercisable for nine (9) months from such occurrence but not
beyond the option's expiration date. Other termination gives the partici-
pant 30 days to exercise except for termination for cause which results
in the option becoming immediately null and void.
Options granted under the Techdyne 1994 Plan and the DCA 1995 Plan,
at the discretion of the Board, may be exercised either with cash, common
stock having a fair market equal to the cash exercise price, the partici-
pant's personal recourse note, or with an assignment to the company of
sufficient proceeds from the sale of the common stock acquired upon
exercise of the option with an authorization to the broker or selling
agent to pay that amount to the company, or any combination of the above.
There are presently outstanding under the Techdyne 1994 Plan options
to 34 officers, employees and advisors of Techdyne and its subsidiary for
171,600 shares of Techdyne common stock exercisable at $1.00 per share
through May 24, 1999. Thirty-nine employees have exercised their Techdyne
options for 51,400 shares, and 13 options for 4,900 shares have been
cancelled due to termination of the employees.
Under the DCA 1995 Plan there are currently options to 14 persons
affiliated with DCA and its subsidiaries for 24,500 shares of DCA common
stock exercisable at $1.50 per share through November 9, 2000. Pursuant
to the sale of substantially all of the assets of DCA's subsidiaries in
Florida, DSF and DMI, the options held by the five employees at the DSF
facility now under operation by the purchaser were extended through March
2, 1998. As of December 31, 1997, options for 168,500 shares of DCA
<PAGE> 14
common stock under the DCA Plan have been exercised, 162,500 of those
options were exercised by four affiliates of the Company and one non-
affiliate. The DCA options to affiliates were granted under Rule 701
of the Securities Act of 1933 (the "Act"), which provides an exemption
from the registration requirements of Section 5 of the Act. A "control
relationship" legend was placed upon the certificates issued to the four
affiliates which requires "affiliates" as that term is defined under Rule
144 of the Act to sell their shares in accordance with Rule 144, in this
instance exclusive of the one year holding period. As for the non-affiliate,
subparagraph (c) of Rule 701 allows sales of any amount of shares obtained
by non-affiliates upon exercise of their options without any restriction.
Each of the affiliates and the non-affiliate paid the par value of the
shares in cash and signed a promissory note for the balance which indebted-
ness was forgiven by the board of DCA. See "Beneficial Ownership of the
Company's Securities" and "Executive Compensation."
On February 27, 1995, Techdyne granted non-qualified stock options,
not part of the Techdyne 1994 Plan, to directors of Techdyne and its
subsidiary for 142,500 shares of common stock exercisable at $1.75 per
share for five years. In April, 1995 an option for 10,000 shares of
Techdyne common stock was granted to counsel as part of his compensation
for assisting in the preparation of Techdyne's registration statement for
a public offering of its common stock and warrants completed in October,
1995. The exercise price of all options is 100% of the fair market value
of the common stock on the date of grant. At present, all Techdyne 1995
options remain outstanding.
In August, 1996, DCA's board of directors approved and issued non-
qualified stock options for 15,000 shares of common stock, options for
5,000 shares each, to the medical directors of its three dialysis centers.
These options are not part of the DCA 1995 Plan, and are immediately
exercisable at $4.75 per share through August 18, 1999. If the medical
director ceases affiliation with DCA or with the professional association
approved to act as medical director of a particular dialysis center, or by
reason of death, permanent disability or retirement at 65 years of age,
such options are exercisable for six (6) months from such occurrence, but
not beyond the expiration date of the option. Other termination gives the
optionee 30 days to exercise except for termination for cause which results
in the option being immediately null and void. The DCA 1996 options may
only be exercised for cash. To date none of the these options have been
exercised. However, the options of the medical director of the DSF
facility, a subsidiary of the Company, for 5,000 shares of DCA common
stock were canceled pursuant to the termination provisions of the Medical
Director Agreement upon his disaffiliation with that facility, which was
sold in October, 1997.
In June, 1997, Techdyne's board of directors and shareholders approved
a 1997 Stock Option Plan ("Techdyne 1997 Plan") pursuant to which 500,000
shares of Techdyne common stock were reserved and under which options,
both incentive and non-qualified, were granted for 375,000 shares of
Techdyne common stock to certain officers, directors, and advisors of the
Company. The options granted under the Techdyne 1997 Plan are fully
vested, are for a period of five years expiring June 22, 2002, and
exercisable at $3.25 per share. The Techdyne 1997 Plan is substantially
similar to Techdyne's 1994 Plan.
On July 31, 1997, Techdyne acquired Lytton and a portion of the con-
sideration included 300,000 shares of Techdyne common stock guaranteed by
Techdyne at certain levels which included earnings objectives of Lytton.
If such guaranteed minimum proceeds from the sale of the Techdyne shares
was not satisfied, Techdyne is required to make up the difference in cash
or its common stock, or a combination of both, at the discretion of
Techdyne. See "Certain Relationships and Related Transactions."
<PAGE> 15
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at FY-End (#) at FY-End($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
- ---- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
CEO
Thomas K. Langbein
Company Options -0- -0- 250,000 (exer) (1)
Techdyne Options -0- -0- 180,000 (exer)(2) 353,400 (exer)(3)
DCA Options 50,000(4) 47,000(5) -0- -0-
Barry Pardon(6)
Company Options -0- -0- 75,000 (exer) (1)
Techdyne Options -0- -0- 180,000 (exer)(2) 353,400 (exer)(3)
DCA Options -0- -0- -0- -0-
</TABLE>
- ----------
(1) The options were out-of-the-money as of December 31, 1997. The value
was determined by the difference between the exercise price, $2.38 per
share, and the closing price of the Common Stock on December 31, 1997,
as reported by the Nasdaq National Market which was $2.13.
(2) 40,000 options exercisable at $1.00 under the 1994 Plan, 40,000
options exercisable at $1.75 under the 1995 Plan and 100,000 options
exercisable at $3.25 pursuant to the 1997 Plan.
(3) The value of the in-the-money options was determined by the difference
between the exercise price and the closing price of the common stock
as reported by Nasdaq National Market on December 31, 1997, which was
$4.38.
(4) Exercised as of December 31, 1997 at $1.50 per share with payment of
cash for par value and the balance in a promissory note forgiven by
DCA. See "Beneficial Ownership of the Company's Securities" and
"Executive Compensation - Summary Compensation Table."
(5) The value realized of the DCA shares represents the difference between
the exercise price and the fair market value of the stock on the date
of exercise, December 31, 1997, which was determined from the closing
price of the DCA common stock as reported by Nasdaq SmallCap on
December 31, 1997, which was $2.44. See column (i) to "Executive
Compensation - Summary Compensation Table."
(6) President and director of Techdyne.
<PAGE> 16
BOARD EXECUTIVE COMPENSATION REPORT
The Company has no executive compensation committee. Compensation of
its executive officers is considered by all five members of the board of
directors, which includes Thomas K. Langbein, the Chairman of the Board
and Chief Executive Officer of the Company and its subsidiaries. Mr.
Langbein is the only executive officer of the Company that has an employ-
ment agreement. The only other executive of the Company's subsidiaries
that has an employment agreement is Barry Pardon, President and director
of Techdyne, a 63% owned public subsidiary. These are the only two indi-
viduals who receive in excess of $100,000 from the Company and/or its
subsidiaries, except for 1997, based upon forgiveness of a promissory
note for $74,500 deemed other compensation, Bart Pelstring, President
and director of DCA, received compensation in excess of $100,000. See
"Executive Compensation."
Mr. Langbein's employment contract was renewed for another five years
in 1994 at the same base salary with $10,000 incremental increases each
year, which increases he waived until June, 1995. Mr. Langbein has most
responsibility for the Company's performance. He has been the motivating
force behind the Company's strengthened sales growth, marketing, expense
control, profit margins, structuring and implementing efficiency programs,
asset management, inventory control, and assessment of plans for existing
and new products and services. In evaluating the performance and setting
the Chief Executive Officer's compensation, the board took into account Mr.
Langbein's successful efforts in directing the Company's operations,
seeking new sources of capital for the Company and its subsidiaries'
operations, aggressively pursuing new areas of growth in the electronics,
electro-mechanical and dialysis industries, and motivating key executive
management toward greater overall efficiencies in labor, cost control,
increased sales and new business. The Company has experienced profitabil-
ity during the last four years after many years of losses due to Mr.
Langbein's leadership.
A stronger financial position in the last few years has enabled the
board to also reward the officers, directors, key employees and advisors
with options under the 1989 Option Plan. The board believes that equity
ownership by Company management and employees is a significant incentive
in increasing earnings and aligning the long-term interest of management
and key employees with stockholders. Options are also the only other
significant component of compensation for the directors. No director
receives any cash compensation for acting as such, unlike most other
public companies, nor does any officer or director receive fees for
participating on any committee. The board also looks to historical
option grants as well as the officer's, director's and/or key employee's
past and prospective contributions to the success of the Company to
determine the appropriate range of awards. Options granted are at prices
not less than the fair market value of the Company's Common Stock on the
date of grant. Options have little value unless management, the option
holders, strive to improve the Company's operations, sales and profita-
bility that should reflect increase in the market price of the Common
Stock. The board also looks to historical option grants and officers',
directors' and key employees' past and prospective contributions to the
success of the Company to determine the appropriate range of rewards.
See "Executive Compensation-Options, Warrants or Rights."
Submitted by the Board of Directors
Thomas K. Langbein Seymour Friend
Anthony C. D'Amore Peter D. Fischbein
Robert P. Magrann
<PAGE> 17
COMPANY STOCK PRICE PERFORMANCE
The following graph shows a five-year comparison of cumulative total
stockholder returns for the Company, the Nasdaq Market Index and the
Electronics Industry Index from December 31, 1992 through December 31,
1997. The cumulative total stockholder returns on the Company's Common
Stock was measured by dividing the difference between the Company's
share price at the end and the beginning of the measurement period by
the share price at the beginning of the measurement period. The total
stockholder return assumes $100 invested at the beginning of the period
in the Company's Common Stock, and the Nasdaq Market Index and the Elec-
tronics Industry Index. The Company did not pay dividends on its Common
Stock during the measurement period and the calculations of cumulative
total stockholders return on the Common Stock did not include dividends.
Comparison Of Five Year Cumulative Total Returns Among Medicore, Nasdaq
Market Index and Electronics Industry Index
Measurement Period
- ------------------ Electronic
(Fiscal Year Covered) Medicore, Inc. Nasdaq Index Industry Index
------------- ------------ --------------
Measurement Pt-12/31/92 $ 100.00 $ 100.00 $ 100.00
FYE 12/31/93 93.33 119.95 136.61
FYE 12/31/94 260.00 125.94 164.82
FYE 12/31/95 506.67 163.35 254.63
FYE 12/31/96 266.67 202.99 386.02
FYE 12/21/97 240.00 248.30 410.75
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the officers and directors of the Company are officers
and/or directors of Techdyne and DCA, including Thomas K. Langbein, who
holds the position of Chairman of the Board of Directors, President and
Chief Executive Officer of the Company, Chairman of the Board of Directors
and Chief Executive Officer of Techdyne and DCA, as well as officer and/or
director of these companies' subsidiaries; Mr. Langbein is also the
President, sole shareholder and director of Todd, a broker-dealer;
Daniel R. Ouzts is Vice President of Finance and Controller of the
Company, Techdyne and DCA; Peter D. Fischbein and Anthony C. D'Amore are
each a director of the Company and Techdyne; and Lawrence E. Jaffe is
Secretary and corporate counsel to the Company and DCA and counsel to
Techdyne. Approximately 1% of the Company's Common Stock and DCA's
securities and options for less than 1% of Techdyne's common stock are
in the name of and held in trust for Mr. Jaffe's wife, to all of which
securities Mr. Jaffe disclaims beneficial ownership. Mr. Jaffe receives
a substantial portion of his fees from the Company, Techdyne and DCA.
In addition, certain of the accounting personnel and administrative
facilities of the Company and its subsidiaries, including Techdyne and DCA,
are common. The costs of executive and accounting salaries and other
shared corporate overhead for these companies are charged first on the
basis of direct usage when identifiable, with the remainder allocated on
the basis of time spent, either through a corporate overhead allocation
or in the case of Techdyne, through a Service Agreement. Since the shared
expenses are allocated on a cost basis, there is no intercompany profit
involved. Utilization of personnel and administrative facilities in this
manner enables the Company to share the cost of qualified individuals with
its subsidiaries rather than duplicating the cost for various entities.
These services are
<PAGE> 18
provided by the Company and allocated to Techdyne pursuant to a two-year
Service Agreement through September 30, 1998. It is the opinion of
management that these services are on terms as favorable as obtainable
from unaffiliated parties.
The amount of expenses charged by the Company to Techdyne and DCA for
each of the three years ended December 31, 1997 were approximately $408,000
and $240,000, respectively. These were included in the intercompany advance
accounts with Techdyne and DCA. As a result of cash transfers from the
Company and corporate overhead allocations, there was an intercompany
indebtedness due from DCA to the Company of approximately $129,000 at
December 31, 1997.
Since the Company's acquisition of Techdyne in 1982, the Company had
been advancing funds at no interest to finance that subsidiary's business
with a substantial amount repaid upon completion of Techdyne' public
offering in October, 1995, which left a net balance due to the Company at
December 31, 1995 of $2,686,000 evidenced by an unsecured demand promissory
note convertible into common stock of Techdyne at a rate of $1.75 per share.
The annual interest rate on the note is 5.7%. There is no schedule for
the repayment of such indebtedness. In June, 1996, the Company converted
$350,000 of this note into 200,000 shares and in November, 1997, the
Company converted $875,000 of the note into 500,000 shares of Techdyne's
common stock, giving it an approximately 63% ownership interest in Techdyne
(approximately 70% including the beneficial ownership of the Techdyne stock
underlying the convertible note). At December 31, 1997, the balance of
the convertible note including accrued interest amounted to approximately
$2,292,000. The Company also had an intercompany advance receivable from
Techdyne of approximately $14,000 with interest at 5.7% at December 31,
1997. Pursuant to Techdyne's refinanced credit facility with a Florida
bank, the Company has not only guaranteed the loans, and secured them with
certain of its properties which it leases to Techdyne, but has also agreed
to subordinate this indebtedness, provided Techdyne may make payments to
the Company on the subordinated debt from additional equity that is
injected into Techdyne or from retained earnings arising subsequent to
March 31, 1995, provided that at the time of any such repayment to the
Company Techdyne is in compliance with the financial covenants of the
loan agreements. The Company does not intend to require repayment of
these advances prior to January 1, 1999.
In 1990 the Company acquired Techdyne's real property in Hialeah,
Florida consisting of the land and two buildings and a parking lot. The
Company is leasing the buildings and the parking lot to Techdyne under a
five year net lease expiring March 31, 2000 at $94,000 per year plus
applicable taxes. Management is of the opinion that the rentals are on
terms as favorable as obtainable from unaffiliated parties.
Techdyne had a credit facility with Consolidated Bank, N.A., now
NationsBank of Florida, which it had amended over the years. The
$230,000 mortgage and the NationsBank credit facility were replaced in
February, 1996 by Techdyne entering into three loan arrangements with
Barnett Bank of South Florida, NA ("Barnett Bank"). One credit facility
was a $2,000,000 line of credit, due on demand, secured by Techdyne's
accounts receivable, inventory, furniture, fixtures, and intangible assets
bearing interest at Barnett Bank's prime rate plus 1.25%.
Barnett Bank had also extended two commercial term loans to Techdyne
in 1996, one for $712,500 for five years expiring on February 7, 2001 at
an annual rate of interest equal to 8.28% with monthly payments of
principal and interest of $6,925 based on a 15-year amortization schedule
with the unpaid principal and accrued interest due on the expiration date.
This term loan has a prepayment penalty and is secured by a mortgage on
properties in Hialeah, Florida owned by the Company, two of which proper-
ties are leased to Techdyne and one parcel used as a parking lot. Under
this term loan
<PAGE> 19
Techdyne is obligated to adhere to a variety of affirmative and negative
covenants similar to those of the 1997 five year term loan of $1,500,000
from Barnett Bank. See below.
The mortgage issued by the Company to secure the $712,500 term loan
provides Barnett Bank with reappraisal rights so that should the principal
amount outstanding under the Note exceed 75% of the reappraised value of
the mortgaged property, such excess has to be repaid by the Company and/or
Techdyne. The Company, as lessor to Techdyne of these mortgaged properties,
has assigned the leases, rents and profits to Barnett Bank as further
security for this $712,500 term loan, provided the Company may continue
to collect the rents until an event of default, if any. The Company, as
lessor of the properties mortgaged, has subordinated its interests in the
leases to the mortgage held by Barnett Bank to secure this term loan.
The second commercial term loan obtained in 1996 is for the principal
amount of $200,000 for a period of five years bearing interest at a per
annum rate of 1.25% over Barnett Bank's prime rate and requiring monthly
principal payments with accrued interest of $3,333 through expiration on
February 7, 2001. This $200,000 term loan carries no prepayment penalty
and is secured by all of Techdyne's tangible personal property, goods and
equipment, and all cash or non-cash proceeds of such collateral.
The $2,000,000 revolving line of credit was extended to $2,500,000
in July, 1997 by a First Amendment to Loan and Security Agreement, Loan
Agreement, and Security Agreement, and fully used to pay the cash portion
of the consideration for the Lytton acquisition completed on July 31, 1997.
See below. Effective December 29, 1997, Techdyne refinanced its revolving
line of credit which is no longer a demand loan but rather has a maturity
date of May 1, 2000, is for an amount of up to $1,600,000 and has interest
at the Bank's prime rate, currently 8.5%.
Techdyne also obtained a five year term loan of $1,500,000 due Decem-
ber 29, 2002 at an annual interest rate of 8.60%. The interest was fixed
based upon a variable rate note (LIBOR plus 2.25% floating rate) and an
interest rate swap agreement entered into with Barnett Bank. The swap
agreement in effect reduces the interest rate risk by allowing Techdyne
to lock-in a fixed rate by converting the foregoing variable rate obliga-
tion. The term loan is payable in equal principal payments of $25,000
plus interest. Early termination of the swap agreement, either through
prepayment or default on the term loan, may result in a cost or a benefit
to Techdyne. The market risk from such early termination that arises
from the movement in interest rates may cause a liability to Techdyne if
interest rates are down, and a benefit to Techdyne if interest rates are
up, with Techdyne recognizing a loss or gain resulting from the difference
between its fixed interest rate and the market value of interest rates at
the time of early termination. Under the term loan, Techdyne is obligated
to adhere to a variety of affirmative and negative covenants, including but
not limited to a debt service ratio of 1:25 to 1:00, a current ratio of
1:5 to 1:00, a capital funds ratio of total debt to capital funds of no
more than 1:7 to 1:00, maintenance of capital funds equal to or in excess
of $3,500,000, and Techdyne may not sell any of its assets or properties,
except inventory in the ordinary course of business, within any calendar
year for which the aggregate book value exceeds $500,000. The term loan
also provides for restrictions on transactions with related persons,
precludes changes in ownership in Techdyne which would reduce the ownership
by Medicore, to less than 51%, and restricts Techdyne from engaging in any
new unrelated business which might adversely affect the repayment of the
term loan.
The revolving and term financing facilities are secured by a first
security interest on corporate assets. The Company has also subordinated
$2,291,665 in principal indebtedness due to it from Techdyne to these
financing facilities, provided the Company may make payments to Medicore
on the subordinated debt from additional equity that is injected into
the Company or from the use, on a quarterly
<PAGE> 20
basis, of retained earnings arising subsequent to March 31, 1995, so
long as Techdyne is in compliance with all financial covenants of the
loan agreements.
There are cross defaults between the revolving and term loans exclusive
of the $200,000 term loan.
The Company has unconditionally guaranteed the payment and performance
by Techdyne of the $1,600,000 revolving line of credit and the three com-
mercial term loans.
Techdyne has advanced funds to Techdyne (Scotland) for that subsidi-
ary's working capital requirements with an outstanding balance of $600,000
at December 31, 1996, having been repaid during 1997. This sum was not
evidenced by a note and bore interest at a rate of prime plus 1.5% per
annum. Techdyne has guaranteed a line of credit for Techdyne (Scotland)
from The Royal Bank of Scotland Plc which credit line has a U.S. equiva-
lency of approximately $33,300 at December 31, 1997, which is secured by
the assets of Techdyne (Scotland). This line of credit operates as an
overdraft facility. No amounts were outstanding under this line of credit
as of December 31, 1997.
On July 31, 1997, Techdyne acquired Lytton Incorporated, which is
engaged in the manufacture and assembly of printed circuit boards and
other electronic products for commercial customers. This acquisition
required $2,500,000 cash at closing, funded by the modified revolving
line of credit with Barnett Bank, as well as 300,000 shares of Techdyne's
Common Stock which had a fair value of approximately $1,031,000 based on
the closing price on the date of acquisition for which Techdyne has
guaranteed $2,000,000 minimum proceeds ($2,400,000 if certain earnings
objectives are met over a twelve month period) to Patricia Crossley, the
seller of Lytton, payable at the option of Techdyne in cash or additional
Techdyne common stock. Patricia Crossley is the wife of Lytton's Presi-
dent, Lytton Crossley. The Stock Purchase Agreement also provided for
incentive consideration based on specific sales levels of Lytton for each
of three successive specified years, which includes payment to Patricia
Crossley of 4% of Lytton's sales of $14,000,000 up to $20,000,000, and 5%
of Lytton's sales over $20,000,000. Lytton Crossley has a one year
employment agreement with Lytton through July 30, 1998 at an annual
salary of $135,000, plus participation in medical and life insurance
programs and profit and other employee benefit plans, and reasonable
business costs and expenses.
Mr. Crossley had borrowed an aggregate of approximately $155,000 from
Lytton, which was repaid at the closing date of the Lytton acquisition on
July 31, 1997. The repayment was made through use of a portion of the cash
consideration paid to Patricia Crossley for the sale of Lytton to Techdyne.
Lytton has a deferred compensation arrangement with its President,
Lytton Crossley, dated August 1, 1997 in the amount of $200,140. The
agreement calls for monthly payments of $8,339 provided that Lytton's
cash flow is adequate to cover these payments and the interest to be
calculated on any unpaid balance as of August 1, 1999. During the period
ended December 31, 1997 a total of $33,357 was paid under this agreement.
On September 16, 1996, Lytton sold its offices and operating facility
to Stanley Avenue Properties, Ltd., a limited liability company whose
membership includes Lytton's President, Mr. Crossley and his wife. Stanley
Avenue Properties, Ltd. acquired the facilities in exchange for a note
receivable to Lytton for $147,000 and the assumption of two mortgage
notes payable for a total sales price of $1,200,152. Lytton recognized
a gain on the sale of the property and equipment in the amount of approxi-
mately $14,400, which was reflected in the revenues section of Lytton's
financial results. The note receivable from Stanley
<PAGE> 21
Avenue Properties, Ltd. of approximately $139,000 was also repaid on
July 31, 1997 upon Techdyne's acquisition of Lytton.
Stanley Avenue Properties, Ltd. leases the property to Lytton under a
five year lease with monthly lease payments of approximately $17,900 for
the first year, adjusted in subsequent years for the change in the consumer
price index, and contains two renewal options each for five years at the
then fair market resale value. Techdyne is guarantor of this lease.
During 1995, pursuant to a redemption agreement, Lytton purchased 249
shares of treasury stock from its former parent, Electrolert, Inc.
("Electrolert"), as well as from certain other minority stockholders.
Consideration included cash, assignment of an account receivable and
provisions for contingent payment upon sale of Lytton to a third party.
This contingent payment resulted in Electrolert receiving $1,150,000 from
the proceeds of Techdyne's acquisition of Lytton, releasing Lytton from
any further liability to its former parent under the redemption agreement.
In 1995, Lytton entered into loan agreements with The Provident Bank
in Ohio for revolving ($1,500,000), term ($1,000,000), equipment (up to
$900,000) and mortgage loans ($900,000), secured by a mortgage on the real
property leased to Lytton and owned by Stanley Avenue Properties, Ltd.,
and by other collateral, and guaranteed by Lytton Crossley. The mortgage
loan was assigned to and assumed by Stanley Avenue Properties, Ltd. and
the mortgage was amended to delete the other loans from indebtednesses
secured by the mortgage. The revolving line was extended to August 1, 1998
and has monthly interest payments at prime plus .5%. The amount outstanding
on this line was $549,000 as of December 31, 1997. The weighted average
interest rate on this line during this period was 9.13%. The $1,000,000
installment loan matures June, 2002 at an annual rate of 9% for two years,
with monthly payments of $16,667 plus interest. After two years, Lytton
will have an option of a variable or fixed interest rate. The balance
outstanding on this loan was $933,010 as of December 31, 1997. The
$500,000 equipment loan is payable over four years through July 1, 2001
with the same interest rate as the installment loan. There was no out-
standing balance on this loan as of December 31, 1997. All of these bank
loans are secured by the business assets of Lytton.
Property, casualty and general liability insurance coverage for the
Company and similar insurance for subsidiaries, including Techdyne and DCA,
had been obtained through the A.C. D'Amore Agency, Inc. an insurance agency
owned by Mr. D'Amore, a director of the Company and Techdyne and registered
as a part-time account executive with Todd, although he has not been active
in the securities business. In 1992, Mr. D'Amore sold his insurance
business and continues as an insurance consultant. Mr. D'Amore continues
to receive commissions for the account of the Company and Techdyne. The
aggregate annual premiums for such insurance were approximately $159,000
for the year ended December 31, 1997 of which $127,000 was for Techdyne.
Mr. D'Amore's commissions were approximately $4,000. In addition, the
Company, Techdyne and DCA obtained group health insurance coverage and
several executive and key life insurance policies through George Langbein,
brother of Thomas K. Langbein. This insurance includes $100,000 term life
insurance covering certain of the executive officers of the Company,
Techdyne and DCA, purchased and paid for by their respective companies.
George Langbein is affiliated as an independent sales representative with
Techdyne. The Company also pays for $1,600,000 of whole and term life
insurance owned by Thomas K. Langbein, including a $500,000 policy assigned
to Thomas K. Langbein in the first quarter of 1997. See "Executive Compen-
sation." Premiums on these coverages totaled approximately $374,000 for
the year ended December 31, 1997 of which $127,000 and $87,000, respec-
tively, were for Techdyne and DCA. Management is of the opinion that the
cost and coverage of the insurance obtained through Mr. D'Amore and George
Langbein are as favorable as can be obtained from unaffiliated parties.
<PAGE> 22
Dialysis Services of Pennsylvania, Inc. - Lemoyne, a wholly-owned subsidi-
ary of DCA, is leasing its dialysis center from DCA under a five year net
lease expiring November 30, 2000 at $33,730 per annum, plus applicable
taxes, utilities, insurance and its proportionate share of related
operating costs. Management is of the opinion that the rental is on
terms as favorable as can be obtained from unaffiliated parties.
The Company established Viragen as a research and development bio-
medical company, primarily for production and use of human leukocyte
interferon, in 1980. In 1986, the Company spun-off Viragen and entered
into certain agreements with its former subsidiary, the singular existing
agreement being a royalty agreement expiring in November, 2001, pursuant
to which Viragen is to pay a schedule of royalty payments with respect to
Viragen's interferon and related product sales with a maximum cap of
$2,400,000. As of December 31, 1997, Viragen has paid approximately
$64,000 of royalties to the Company. Certain of Viragen's indebtedness
to the Company was paid with Viragen common stock, with the Company at
December 31, 1997 owning approximately 259,000 shares of Viragen shares
originally owned. The Company sold approximately 10,000 Viragen shares
in 1997 recognizing a gain of $49,000. The Company leases 2,800 square
feet of office space from Viragen for $22,000 per annum under a five year
renewed lease through December 31, 2002.
The only remaining common director of the Company and Viragen is Peter
D. Fischbein, also a director of Techdyne. Mr. Fischbein is an attorney
who had acted from time to time as counsel to the Company, Techdyne, Todd
and Viragen. See "Election of Directors" and "Beneficial Ownership of the
Company's Securities."
AUDITORS
The audit committee is reviewing the reports, services and fees of
Ernst & Young LLP, the Company's independent accountants since 1978 and
which firm audited the financial statements of the Company for fiscal 1997.
Upon the audit committee's review, it will make a recommendation to the
board as to the independent accountants which it determines should audit
the financial statements of the Company for the current fiscal year and
shareholders will be so notified.
A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if desired
to do so. The representative will also be available to respond to appro-
priate questions from shareholders attending the meeting.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered by the Company for inclusion
in the 1999 Proxy Statement must be received by the Company not later than
February 10, 1999. Any such proposal should be sent to the Secretary of
the Company, Lawrence E. Jaffe, 777 Terrace Avenue, Hasbrouck Heights, New
Jersey 07604. Any such proposal should provide the reason for it, the
complete text of any resolution and other specified matters, and must
comply with Rule 14a-8 of Regulation 14A of the proxy rules of the Securi-
ties and Exchange Commission.
To nominate a director at the Annual Meeting, a shareholder must
satisfy Florida law and the By-Laws of the Company. A shareholder who
wishes to suggest a potential nominee should provide the Secretary of
the Company for the 1999 Annual Meeting written notice of such nominee
and other
<PAGE> 23
appropriate information at least 60 days prior to that Annual Meeting,
detailing the qualifications of such nominee for consideration by the
board. Any shareholder requesting a copy of the Company's By-Laws will
be furnished one without charge upon written request to the Company.
OTHER MATTERS
Management is not aware of any other matter to be presented for action
at the meeting other than the proposal to elect two members of the Class 3
directors as set forth in the accompanying Notice of Annual Meeting and in
this Proxy Statement, and management does not intend to bring any other
matter before the meeting. However, if any other matter should be
presented at the meeting, it is the intention of the persons named in the
accompanying proxy to vote said proxy in accordance with their best
judgment and in the best interests of the Company.
UPON WRITTEN REQUEST BY ANY SHAREHOLDER OF RECORD (OR ANY SHAREHOLDER
WHO OWNS THE COMMON STOCK LISTED IN THE NAME OF A BANK OR BROKER AS NOMINEE)
AT THE CLOSE OF BUSINESS ON APRIL 17, 1998, TO THE SECRETARY OF THE COMPANY,
LAWRENCE E. JAFFE, ESQ., 777 TERRACE AVENUE, HASBROUCK HEIGHTS, NEW JERSEY
07604, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997 WILL BE PROVIDED WITHOUT CHARGE.
Kindly sign, date and return the enclosed form of proxy. YOUR VOTE
IS IMPORTANT.
By Order of the Board of Directors
LAWRENCE E. JAFFE
Secretary and Counsel
May 1, 1998
<PAGE> 24
APPENDIX A
PROXY
MEDICORE, INC.
The Board of Directors Solicits This Proxy
The undersigned appoints Lawrence E. Jaffe or Peter D. Fischbein,
with power of substitution in each, proxies to vote all the shares of
MEDICORE, INC. which the undersigned may be entitled to vote as a stock-
holder of record on April 17, 1998 at the Annual Meeting of Shareholders
to be held Wednesday, June 10, 1998, or any adjournment thereof.
When properly executed and returned in a timely manner, this proxy will
be voted at the Annual Meeting and any adjournment thereof in the manner
directed herein. Directors recommend a vote FOR Proposal 1. SHARES WILL
BE SO VOTED UNLESS OTHERWISE INDICATED.
1. Election of Directors:
Nominees: THOMAS K. LANGBEIN for Class 3 director.
SEYMOUR FRIEND for Class 3 director.
[ ] FOR director nominees listed; [ ] WITHHOLD AUTHORITY to vote
for director nominees listed.
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below)
- ---------------------------------------------------------------------------
2. In their discretion, such other business as may properly come before
the meeting.
(Back side of the card)
IMPORTANT: PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED.
Signatures(s) should be exactly as
your name(s) appears on this proxy.
If signing as executor, administrator,
trustee, guardian or attorney, please
give full title when signing. If
stock is registered in the names of
joint owners, the proxy should be
signed by each. If the stockholder
is a corporation, sign full corporate
name by a duly authorized officer.
- -----------------------------------------
(Signature)
- -----------------------------------------
(Signature)
Dated: , 1998
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